Indian Economic Activity Gaining Steam, Corporate Sales Continue To Improve

March 02,2021

The Reserve Bank Of India (RBI) stated in a monthly update that domestic economic activity is gaining steam as COVID-19 incidence recedes and the ongoing vaccine rollout releases pent-up optimism. All engines of aggregate demand are starting to fire; only private investment is missing in action and the time is apposite for it to come alive. Broader measures of liquidity reflect easing of monetary and financial conditions in the system. Early corporate results for Q3:2020-21 indicate that sales continue to improve as they rise out of contraction; combined with a fall in raw material costs and saving on account of lower interest expenses, there has been a jump in operating profits. Pro-cyclical industries in the nonfinancial sector - auto, steel and cement - registered a sharp rebound in volumes, increases in output prices in a strong pricing environment and adopted cost cutting measures. Vaccine approvals, the launch of vaccinations and announcements of additional policy stimulus in some countries infuse hope that the global economy will regain momentum, the RBI noted.

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